Here's How Much Canadians at 35 Need to Retire

Here’s How Much Canadians at 35 Need to Retire

If you want to create enough cash on hand to retire, then consider an ETF in one of the safest and fastest-growing sectors.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 13, 2024 8:45 pm EST

Retiring at 35 in Canada is no small feat. It’s a bold ambition that requires careful planning, substantial savings, and a commitment to smart investing. The amount you’d need to retire comfortably depends on a few key factors: your desired annual expenses, your life expectancy, and inflation over time. A common starting point is the 25x rule, which suggests saving 25 times your anticipated annual expenses. For instance, if you think you’d need $50,000 annually to live comfortably, your nest egg target would be $1.25 million. However, this assumes a modest withdrawal rate and doesn’t fully account for unforeseen expenses like healthcare or major lifestyle changes.

woman looks out at horizon — Source: Getty Images

What to consider

Given that many people haven’t accumulated millions by their mid-30s, early retirees rely on investments to keep their savings growing. Rather than letting your money languish in a savings account with negligible interest, investing in the stock market, bonds, or other income-generating assets can significantly boost your financial future. Exchange-traded funds (ETFs), in particular, have become a popular choice for young investors. These offer diversification, professional management, and relatively low fees. One ETF worth considering for early retirement planning is iShares S&P/TSX Capped Materials Index ETF (TSX: XMA).

XMA is an ETF that tracks Canada’s materials sector, which includes industries like mining, agriculture, and chemicals. This sector is crucial to Canada’s economy and often performs well during periods of global economic growth. With a year-to-date return of 29.74% as of writing, XMA has shown strong performance. Benefiting from rising commodity prices and increasing global demand for resources. Its top holdings include some of Canada’s largest and most well-known companies.

One of the reasons XMA is particularly appealing for long-term growth is its focus on basic materials, which make up 96.67% of the portfolio. These companies often see increased demand during infrastructure booms or periods of technological innovation requiring raw materials. However, like any sector-focused ETF, it comes with risks. Commodity prices can be highly volatile, influenced by global market dynamics and geopolitical events. Still, its diversified holdings within the materials sector help mitigate risk compared to investing in a single company.

More to come

The ETF’s recent performance is a testament to its resilience. After a slight decline of 1.95% in 2023, XMA roared back in 2024 with a near 30% gain year to date. Much of this growth can be attributed to strong performances from its top holdings, which have benefited from rising gold and silver prices.

Looking ahead, XMA’s future potential is closely tied to global trends. Economic expansion in emerging markets, investments in green technologies, and renewed infrastructure spending in developed countries all bode well for the materials sector. Moreover, there are companies well-positioned to benefit from the increasing demand for critical minerals used in electric vehicle batteries and renewable energy systems.

For early retirees, an investment like XMA can provide both growth and diversification. However, it’s important to remember that no single ETF should make up your entire portfolio. Pairing XMA with other ETFs focused on different sectors, such as technology or healthcare, can help balance your risk and maximize returns. Furthermore, consider including some dividend-paying stocks or ETFs for a steady income stream, as cash flow is essential during retirement.

Bottom line

Retiring at 35 is an ambitious but achievable goal for Canadians with the right planning and investment strategy. XMA is a strong option for those seeking exposure to Canada’s materials sector, offering the potential for significant growth during favourable economic conditions. That said, diversification remains key. Pair your investments wisely, leverage tax-advantaged accounts, and keep an eye on market trends. With discipline and a clear financial plan, early retirement can move from a lofty dream to a tangible reality.